The yen tumbled to a two-week low against the dollar on Monday after Japan's finance minister warned that Tokyo was ready to intervene in the currency market if needed. Tarō Asō pointed to a stronger risk sentiment due to positive vibes from Wall Street and cited a rebound in European stock markets that was easing demand for traditional safe havens such as the Japanese currency.
The yen hit an 18-month high against the dollar last week, a gain of 15 percent over a six month period, prompting renewed intervention possibilities by Prime Minister Shinzo Abe, who said Japan was watching the yen's movements carefully and step in if necessary.
Investors maintain that government involvement is not something that will happen sometime soon and believe that the talk of intervention was meant to talk down the yen.
According to Mazzen Issa, senior FX strategist at TD Securities, in New York, "Japan has been talking up the dollar for a month now, but has failed to stem the tide. If anything it's more indicative that officials are watching, but it's more of an empty threat. I would characterize it as being more bark than bite."
US Treasury Concerned
Officials at the U.S. Treasury are concerned with excessive global “one-sided” intervention by countries in order to weaken their currencies which they say could result in economies with big trade surpluses, such as Japan, being classified as manipulators.
Meanwhile, the greenback rose more than 1 percent versus the yen to hit its strongest level since April 28, well clear of last week's low of 105.52 yen. The dollar was last up 1.2 percent at 108.42 yen.